No expert evidence of market practice in relation to dishonesty allegation; Expert criticised for not properly engaging in Joint Memorandum process; Expert evidence of difficulties with enforcement in other jurisdictions may be "borrowed" from other cases
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- No expert evidence of market practice in relation to dishonesty allegation
Dishonesty – objective text
Defendants to various claims including for deceit and conspiracy to injure by unlawful means, in relation to commission payments for giving financial advice, asked the court's permission to call expert evidence on market practice relating to the disclosure of shared commission within the financial advice sector. This evidence, they argued, would go to the "key element of whether or not the defendants acted with …dishonest intent". They argued that the court would have to assess the state of mind of some of the defendants in relation to what they believed was normal and reasonable market practice over a decade ago (when the event giving rise to the claim took place).
The claimants resisted the application to adduce expert evidence on the basis that it was for the court alone to decide the question of dishonesty: the test for dishonesty was objective, and not a matter for market practice.
The judge held that:
- the standard of honesty is objective, following the Supreme Court decision in Ivey v Genting SC 2018 AC 391, to be assessed by reference to the standards of honest and reasonable people and determined by the court.
- expert opinion evidence about market practice or the regulatory position at the time of the relevant events is not admissible in relation to any argument as to the appropriate objective standard. Evidence of the regulatory position could, if otherwise relevant, be established at trial using the relevant documentary material.
Although expert evidence was not permitted in relation to the issue of dishonesty for the purposes of all but one of the claims, it was permitted in relation to the allegation of conspiracy to injure by unlawful means. In relation to that tort, the honesty of the defendants' subjective belief that the conduct complained of was not unlawful was a potential defence: the tort required an intent to injure, so the judge held that it was open to the defendants to defend that claim on the basis that they honestly believed their conduct did not involve anything unlawful. Market practice was potentially relevant to that subjective belief.
- Expert criticised for not properly engaging with Joint Memorandum process
The Commercial Court has been sharply critical of the conduct of an expert witness who, the judge said, lamentably failed to engage constructively in meeting his opponent or to attempt to reach agreement at or after that meeting. Only a few weeks before the trial date at the pre- trial review of the claim, of his own initiative, the judge debarred the claimants from adducing expert evidence on one of two quantum issues, unless they succeeded in an application for relief from sanctions.
Independent experts are obliged, after exchanging their initial reports, to meet experts for the other party(ies) , on a without prejudice basis, to discuss the issues in dispute and reach agreement, where possible. In this case a Joint Memorandum had been ordered to be produced, after the relevant experts' meeting, recording areas of agreement and disagreement, and explaining why agreement couldn't be reached. The meeting took place but the claimants' expert failed to engage in the production of a Joint Memorandum; instead he merely indicated that a "supplemental report" would be produced and that he had "not finalised his thinking" In the event, although he did produce a Supplemental Report, no further Joint Memorandum was filed. There were two issues for expert evidence, with different deadlines for the meetings of experts and Joint Memoranda. The claimant's expert similarly failed to engage with the process in relation to the second issue.
The judge commented: "nobody involved in litigation in this court, whether as client, lawyer or expert, can be in any doubt that the court expects and requires the expert to take a constructive approach, discussing the contents of their report and the issues on which they are required to express their opinions, reaching agreement where they can, and setting out concisely where they cannot reach agreement and why they cannot"
It is noteworthy also that the judge made the debarring order of his own motion, with no application from the defendants.
It can be tricky managing an expert whose role it is to be independent and whose prime duty is to the court, rather than to the parties or the lawyers instructing them. The judge nevertheless observed that the expert's instructing solicitors should have made it clear that the expert's conduct was not acceptable, and if they failed to do so that was itself a serious failing.
Choosing the right expert for the case, and, even with an experienced expert, ensuring that the expert fully understands his/her duties to the court, and the consequences of non-compliance, are key issues for disputes lawyers.
- Expert evidence of difficulties with enforcement in other jurisdictions may be "borrowed" from other cases
On an application for an order that a claimant provide security for the costs to be incurred by a defendant two tests must be met, namely that:
- the court has jurisdiction to order security against the particular claimant, and
- the court should exercise its discretion to do so
To have jurisdiction the court must be satisfied that (pre Brexit) the claimant is resident outside the EU (or a state signatory to the Hague Choice of Court Convention 2005).
In Pipia v Bgeo Group Ltd  EWHC 325 (Comm) the claimant, resident in Georgia, argued that an Association Agreement (AA) between Georgia and the EU meant that the claimant was to be treated in the same way as an EU resident, so that no security could be ordered. The judge disagreed, holding that the AA didn't impliedly exclude an application for security for costs. She therefore had to consider whether security should be ordered in this particular case, taking into account the risk of difficulty for the defendants of enforcing a costs award in Georgia. The defendants adduced a Memorandum from a Georgian legal expert and cited a 2016 decision, (Bestfort Developments v Ras Al Khaimah Investment Authority)  EWCA Civ 1099 in which the Court of Appeal had held that there was "a real and serious risk" that a costs award could not be enforced in Georgia. In response to the claimant's argument that only expert evidence formally exchanged and adduced under CPR 35 could be relied on, the judge in Pipia held, citing the Commercial Court Guide, that evidence on an interim application, such as for security for costs, can be given by witness statement and needn't comply with CPR 35. The court could also take into account the findings as to difficulties in enforcement in Georgia in the previous Court of Appeal case, based on evidence from the same Georgian legal expert.
The judge ordered that the claimant provide security, noting also that he had refused to provide information as to whether he had assets in the UK or elsewhere in the EU against which a costs order could be enforced.
It is helpful for defendants facing claims from claimants resident outside the EU, without assets within the EU, (and possibly on a No Deal Brexit also those resident elsewhere in the EU) that evidence of the risks of enforcing a costs order in a claimant's state of residence may be relatively informal. It is in any event sensible, before approaching a foreign law expert, to check recent reported applications for security for costs, for judicial comment on the relevant foreign jurisdiction. Useful judicial comment on foreign jurisdictions (albeit of a more generic nature) can also sometimes be found in contested jurisdiction applications.